Helping Failing High School Students Pass: Revolution Prep Founders Ramit Varma and Jake Neuberg (Part 4)

SM: What does a deal size look like for your company? Let’s use Los Angeles Unified as the example.

RV: The LAUSD contract ends up being between $500,000 and $600,000 annually.

SM: Is that an annual subscription service?

RV: Yes. It is $30 per student, per year. The price of the contract can fluctuate some if the number of students enrolled in the program increases or decreases.

SM: When you sell your software product to the school districts, are the teachers using it to work with their students?

RV: Teachers are there providing oversight, but primarily it is students working with the program one-on-one.

SM: Do you have any human resource costs associated with your delivery of that program?

RV: No. We do offer professional development when we get a school district started, but even a lot of that is available online. If we do send someone out there to train the school districts, they pay for that separately. Most districts are opting for the online option there as well.

SM: I think your online SaaS model scales much better than your brick-and-mortar SAT prep business.

RV: That is something we have thought about a lot. The way the business is organized, we end up with 60% to 75% margins on the brick-and-mortar business and with 95% margins on the software business. For us, the areas of future investments are definitely in the software space.

We have two other software products that work off the same platform. One is an algebra ready product and the other is an algebra 1 product. The first product is to help students get ready to take algebra and the second product is to help students pass it.

We also have the website TutorSource.com. Right now we allow tutors around the country to list themselves as subject matter experts in whatever subject they want. Parents can find the tutors they want, and we execute the payment processing services. Those tutors are not our employees; we just offer the marketplace. We feel that marketplace is going to be the answer to connecting with a private tutor. The second part of the vision for that site is to allow students to create study groups and then pull live tutors into their study groups. We would take a portion of that fee. We feel that is one of the most disruptive business models we have out there.

SM: Are you marketing your algebra products to high schools?

RV: Yes, because they are offered on the same platform as our other school district software is offered on.

SM: From the perspective of scaling a business, that platform is the most interesting to me. You are doing $500,000 deals, and if you can pull off enough of those, you have a very strong business.

RV: We think that education is coming up on a very strong inflection point and the value will be migrating from textbook companies to companies like ours that have innovative, perspective, and data-driven course designs. We definitely agree with you. The textbook industry is not built for the next 100 years. Our algebra courses are our first step in that direction.

This segment is part 4 in the series : Helping Failing High School Students Pass: Revolution Prep Founders Ramit Varma and Jake Neuberg
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